Markit - UK labour market (background stats)

Markit director and chief economist Chris Williamson has provided a range of comments on the UK labour market.

Please find below his comments on the data:

"Today's labour market numbers follow recent upbeat data from the business surveys, suggesting that companies are taking on more staff as the economy shows a renewed upturn following the weather-related disruptions to business late last year.

"The highlight was a 10,200 fall in the number of people claiming unemployment benefit - the largest decline since the improvement seen in the second quarter of last year, when the economy was rebounding strongly from the recession.

"Not all the news was upbeat, however, with the overall rate of unemployment rising to 8.0% in January, driven by a record increase in youth unemployment, which hit 18.3%. Public sector employment fell 45,000 in December compared to three moths earlier, though private sector headcounts rose by 77,000 over this period.

"We expect the goods news to continue, in the short term at least. We have seen a surge in the number of people placed in jobs by recruitment consultancies in the first two months of 2011, while job creation hit a 20-year high in the manufacturing sector in February according to the PMIs. A growing divergence by sector is also signalled, however, with services and construction continuing to reduce headcounts, and public sector job losses set to rise.

"Pay growth picked up in the three months to January (up to 2.3%, the highest since May 2010 and up from 1.8% in December), but still lags inflation, which is running at 4.0%. The increase was driven by the private sector, where pay growth rose to 2.3% (matching the rate of increase seen in the public sector) and also reflected bonus payments (pay growth excluding bonuses was unchanged at 2.2%). Reassuringly, the more up-to-date survey data suggest that pay growth also remained subdued in February.

"Weak wage inflation will buy time for the Bank of England's Monetary Policy Committee while it evaluates the underlying growth momentum in the face of growing headwinds for the global economy. The disaster in Japan, persistent high oil prices following unrest in the Middle East and North Africa and ongoing debt worries in the Eurozone - the UK's largest export market – all pose risks to the economic outlook in relation to both inflation and growth."